US Perspective—09.08.16
09/08/2016
www.themaxfieldreport.com
Buyers and sellers struggled to agree on prices last week, as buyers appeared once again ready to take dead-aim on lower prices, while packers appeared as if they wanted to try to hold prices steady on the heels of a decent week of sales.
They were not able to come to a common ground on prices and a stalemate developed.
Sources report that business concluded last week paled in comparison to the week prior, leading to opinions that packers fell well short of selling the slaughter. In the meantime, as it pertains to prices, basis the conversations we have had, it appears that trading took place at steady levels to roughly a dollar under the last reported trading levels, but only on a handful of selections, thus leading to thoughts that packers may have a few more offers this week.
As it pertains to sales, trading reported last week includes BBS trading at $70, while sales of CBS checked in at $60, in spite of attempts to buy at levels below $60. Meanwhile, sales on HNH were at $58, while sales on HNS checked in at $74, The only other trading reported were multiple sales on HTS as we had sales on regular weights ranging from $76-$68, while sales on Jumbo HTS reflected levels of $72.
Reports from the cowhide trade are calling last week and uneventful week of activity. In fact, when speaking with a couple of the larger producers, they shared they did not have any bids last week.
Sellers fortunate enough to have interest last week report that the majority of interest shown by buyers was too aggressive to consider. This is leading to thoughts that it is rather likely that producers collectively failed to liquidate their production last week, which is not a good sign to sellers as the number of cows in the slaughter mix continues at unseasonably high levels.
Meanwhile, we were able to pick up a couple reports of trading last week, as sources share that they are aware of HNDC changing hands at $46, while sales on processor HTS reflected levels of $64.
Producers are likely to have offer lists that are fairly well populated. Especially considering that we continue to see slaughter levels exceed levels of a year ago by roughly 10% over the course of the past three months. In the meantime, we are only two weeks from members of the trade beginning their travel to Asia prior to the start of the All China Leather Exhibition in Shanghai (August 31-September 2). Usually, those traveling prefer to have hides to sell. However, looking at the market as a whole, we are not sure that any of those travelling have enough confidence in the market at this time to operate from a long position, especially considering that there appears to be more than ample offers of hides from several other origins around the globe also for sale.
That said, there continues to be underlying pressure in the market and we still have some guarded optimism as to what the last quarter of the year may hold in terms of leather orders. Overall, it is no secret that leather prices are lower than a year ago and substantially lower than the prices we saw heading into Shanghai two years ago when cattle hide and leather prices reached their all-time record highs.
The other side of the argument is that the Chinese economy still does not appear as if it is firing on all cylinders.
Last week we saw that sales of new vehicles in the US are exhibiting signs of slowing and pundits are now forecasting that sales in 2016 will likely only match those of last year, which cannot be interpreted as a positive for the overall market.
At the end of the day, the ACLE is always an important fair, and in our opinion will be of even more importance this year. As mentioned above, we have seen leather downgraded, minimised, and removed from many articles following the rapid price run-up in 2014. Historically, veterans of the trade will claim that it takes approximately two seasons for leather to “work its way” back into the equation and it will be interesting to see if this plays out over the course of the fourth quarter.
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